黑洞社区

Kier is looking to raise more than a quarter of a billion pounds to bolster its balance sheet through a rights issue as it creaks under the weight of its debt, a move which has led to its shares diving by more than 32% to 517p.

The contractor, which reported average month-end net debt of 拢375m at the close of its last financial year in June, said the 拢264m rights issue was being tabled 鈥渢o reinforce [our] strong positions in growing markets over the long-term鈥� and better position the firm in the light of what it called 鈥渢ighter credit markets and more stringent tender pre-qualification requirements鈥�.

It said net proceeds of the 409p-a-share issue 鈥� a 34% discount to yesterday鈥檚 closing price 鈥� would help it speed up its net debt reduction plans and strengthen its balance sheet.

The results of the rights issue will be announced on 20 December, when the 64.5m new shares start trading.

Kier鈥檚 financial health has been a cause for concern among the investment community for some time. 黑洞社区 Value analyst Tony Williams described the rights issue move as 鈥渁 desperate act鈥�.

The rights issue comes five months after Kier announced it was aiming to achieve an average month-end net debt of approximately 拢250m and a year-end net cash position for its financial year ending 30 June 2021.

The risks around its net debt have increased since then. Lenders were looking to reduce their exposure to the construction sector, the group said, 鈥渨hich may affect the confidence of other credit providers and liquidity in the medium term鈥�.

Kier also said the focus of potential clients and customers on contractors鈥� balance sheets also meant the procurement process was becoming 鈥渋ncreasingly rigorous鈥�, while there was 鈥渋ncreasing pressure from stakeholders to shorten supply chain payment terms鈥�.

The group said the rights issue was 鈥渆xpected to mitigate these risks, whilst also allowing the company to accelerate its debt reduction programme and increase the strength of its balance sheet鈥�.

Kier said it was forecasting a year-end net cash position for 2019 and targeting an annualised average net debt to Ebitda ratio of less than one times.

Investors holding nearly a third of Kier鈥檚 stock have indicated they will take up their allotment of shares through the rights issue.

Haydn Mursell, Kier鈥檚 chief executive, said the recent change in sentiment from credit markets towards the UK construction sector had 鈥渓ed to lower confidence among other stakeholders and an increased focus on balance sheet strength.

Mursell said: 鈥淭he rights issue is intended to address these issues, better position Kier to continue to win new business and further strengthen our market leading positions.鈥�

Tony Williams said the rights issue was not a surprise as Kier needed to raise capital. 鈥淏ut this is a desperate act and it鈥檚 a big, big discount. They鈥檙e teetering,鈥� he said.

Williams said it was 鈥渦nheard of sending out a rights issue in the afternoon. It suggests to me that something has gone wrong this morning, and that would knock my confidence.

鈥淚f I was them I would sell their housebuilding business, but I don鈥檛 think they will.鈥�

In March this year Galliford Try launched a rights issue which raised around 拢150m as it sought to cover the mushrooming costs of the much-delayed 拢550m Abderdeen road project.